Emerging Markets Will Represent Over 50% of Global Vehicle Capacity in 2020 (IHS)

IHS Automotive is forecasting that by 2020, emerging markets such as China, Brazil, Eastern Europe, Middle East and South America where improved incomes enable entry into new vehicle ownership, will represent over 50% of global vehicle capacity share. However, there are some problems according to IHS Automotive’s managing director Michael Robinet:

“Feeding these consumers then drives sizeable supply side problems… To maintain long-term competitiveness, companies are likely to seek new ways to build vehicles for consumers with an eye towards building greater financial stability, de-risking on a global scale. As a result, the industry is sourcing exponentially more vehicles and their components closer to the final consumer. This Co-Location has major implications for the sector and its consumers.”

Obstacles that co-location help to avoid includes tariffs and non-tariff barriers, escalating logistics costs, emissions legislation and currency risks/fluctuations.

“…as has been witnessed in Western Europe, Canada and Australia of late, the elimination of production capacity is a matter of national economic welfare as thousands of jobs are at stake. Production capacity in these regions declined 4 million units over the past decade while emerging locations grew 29 million units– a startling shift with significant ramifications. These governments will be under intense pressure to increase incentives to maintain these facilities or run the chance of losing the footprint – a prospect which is difficult to absorb. The fallout from a plant closures is immense.”